AIS Faculty Research Spotlight

Clipping Groupons Earnings

Thousands of deal- hungry consumers visit Groupon.com to buy daily discounts on local and national products and services. Theoretically, when a customer purchases a deal through this website, Groupon and the retailer split the profit equally, but Groupon has been reporting the entire amount of the purchase—twice their actual revenue—as fully their own, raising serious concerns about the reliability of their accounting practices.

VSB accounting professor Anthony Catanach’s research brought light to this and other significant problems with Groupon’s S-1 filing with the U.S. Securities and Exchange Commission (SEC). Catanach shows that Groupon, in preparation for an IPO, considerably overstated revenues in income statements. Rather than reporting revenues on a net basis, which would have been the proper format for a company of this type, Groupon instead reported revenues on a gross basis.

According to Catanach, Groupon failed to follow generally accepted accounting principles and did not conform to specific requirements set forth by the Emerging Issues Task Force. Catanach’s revealing research caught the attention of the media and of the SEC, which ultimately intervened and compelled Groupon to restate its revenue.

Catanach’s work has appeared in BNET, CNN Money, Forbes, The Economist, and the New York Times Deal Book. He also has been interviewed on Bloomberg West, as well as on CNBC’s Street Signs and Fast Money shows.

Catanach’s academic research has appeared in Accounting Horizons, Advances in Accounting, the Journal of Managerial Issues, and Researchon Professional Responsibility and Ethics in Accounting. He has won several Best Paper Awards and received the first-ever Cary M. Maguire Fellowship in Applied Ethics from the American College Center for Ethics in Financial Services. Catanach also is the co-editor of the Grumpy Old Accountants blog.

Faculty Spotlight

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The Villanova School of Business is a premier educational institution that offers undergraduate programs, graduate programs and executive education. Founded in 1922, VSB is known for academic rigor; creativity and innovation; hands-on and service learning opportunities; a firm grounding in ethics and an applied education that prepares students to become outstanding leaders and global citizens within the ever-changing, complex, and fast-paced world of business.